Q1 2009 Bellwether Report: Turning point for marketing budgets
The IPA’s latest Bellwether survey published today has found that the rate of decline of marketing spend slowed in Q1 2009, suggesting budget cuts may have reached their peak in Q4 2008.
Businesses confidence has also picked up from the all-time low of Q4, with the percentage of companies believing their prospects have improved rising from 5% to 14%.
The IPA’s president and CEO of M&C Saatchi Worldwide, Moray MacLennan, said: “This data supports the view that the bottom of the market has been reached. It will be a long road to full recovery, but this maybe the turning point.”
However, 45% of all companies surveyed by the IPA revised down their marketing budgets for the current financial year in Q1, far exceeding the 11% that reported an increase, suggesting that companies remain “under intense pressure to cut marketing costs”.
Although overall budget cuts still represent the second steepest decline in the report’s nine-year history, with spend set to fall again in 2009, the net balance of those reporting an increase minus those reporting a decrease rose from -42% in Q4 2008 to -34% in Q1 2009.
The hardest hit budgets in Q1 were for main media advertising and ‘all other’, which includes PR, events sponsorship and market research.
Online advertising also suffered a record reduction in spend, but at a far weaker rate than for total marketing spend, indicating a gain in share now estimated at almost 10%.
The survey found that budgets for the 2009 financial year have been set lower than actual spend in 2008 on average, which is the first time since the survey began that initial budgets have been set below the previous year.
Marketing budgets and economic growth
The Advertising Association (AA) has also revised down its UK adspend forecast, which is now expected to fall by 9.1% in 2009 and 0.2% in 2010.
This represents a substantial downgrading of the outlook from the AA’s previous forecast of a 2.9% contraction in 2009.
The latest Bellwether data supports the AA’s new adspend prediction, however, the IPA said the industry will make a “V-shaped” recovery.
Chris Williamson, author of the Bellwether report, said: “The Bellwether raises hopes that a bottom was reached in Q4 and that the rate of budget cutting will ease as we move through 2009.
“Any return to growth still looks a long way off, however, and is unlikely to be seen this year, as expenditure on all types of marketing and advertising continues to fall at rates that were unprecedented prior to last autumn.”
Last week, GroupM forecast an 11.2% fall in UK adspend in 2009, with global spending predicted to drop 4.4% to $425 billion.
Meanwhile, Carat’s latest report predicts a 7.1% fall in UK adspend this year, with worldwide spend falling 5.8%, led by negative growth in almost every major advertising market, with the exception of China, according to Carat.
Jerry Buhlmann, CEO of Aegis Media, said: “These forecasts represent widespread adoption of a much more cautious approach to spending in the face of widespread economic uncertainty. Of course, these predictions themselves are just that: our best guess at this point in time, in a market we know to be uncertain.”